Archives for April 2015

Reuters / Laszlo Balogh

A surging US currency has hit the country’s largest companies like PepsiCo and Google, shaving off more than $20 billion from their 2015 first quarter sales.

General Motors, IBM, Procter Gamble, Amazon and Johnson Johnson have experienced $1billion plus haircuts on sales as they translated revenues earned abroad into US dollar terms, the Financial Times reported on Sunday. The world’s most valuable company Apple is to report earnings on Monday and warned in January that the currency move could slice more than $2 billion from its quarterly revenues. This is after the company posted the biggest quarterly earnings in corporate history of $18 billion in the quarter to December last year, surpassing Wall Street’s most optimistic expectations.

READ MORE: Rising dollar major threat to global economy – study

For companies that do a large part of their business overseas, a strong dollar means lower sales when the money is back from a country with a weaker currency.

“Currency has been a powerful headwind for all multinational companies,” Dan Kelley, portfolio manager at Fidelity was cited as saying by the FT. “It is something companies are having to think differently about — what the implications are going forward and whether it makes sense to alter their cost structures.”

Meanwhile, McDonald’s, Google, Facebook, Microsoft, Tyco, Coca-Cola, Kimberly-Clark, 3M, Caterpillar and PepsiCo are among the dozens that have pointed to currency swings when delivering results. Xerox Corp also blamed a strong dollar for its 6.3 percent revenue decline in Q1 2015 to $4.47 billion and cut its full-year profit forecast.

Seventy-one percent of SP 500 companies have eclipsed first-quarter earnings expectations, while 55 percent of corporates have failed to beat revenue forecasts, according to SP Capital IQ. More than 100 of the roughly 190 SP 500 constituents that have reported first-quarter results had a $20.1billion reduction in sales, FT analysis showed.

Revenues, also known as ‘top-line growth’, show how quickly a company is growing. Revenues of large US corporations have latterly gained from a weaker dollar and a strong push into emerging markets. However, the greenback has risen about 23 percent against a basket of major currencies in the past year and has strengthened significantly since the start of 2015, thus turning out to become a driver of revenue decline.

“Top-line growth is incredibly challenged. The dollar is even a bigger problem than people thought,’’ chief strategist at BTIG Dan Greenhaus told the FT.

Article source: http://rt.com/business/253257-us-dollar-companies-sales/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

A general view shows the headquarters of Gazprom in Moscow (Reuters / Sergey Karpukhin)

Lithuania is taking the lead in the EU’s antitrust case against Gazprom, which could fine Russia’s biggest gas supplier more than $10 billion, according to the Russian Ambassador to the European Union, Vladimir Chizhov.

“It was Lithuania, that was made public, and they were making some very outspoken statements on that score, boasting of a success that they had achieved with the launch of this investigation. Which of course leaves the impression that the whole affair was political from the outset,” the ambassador said in an interview with Euroactiv.

Chizhov has served as Russia’s ambassador to the EU since 2005, and before that, he was Russia’s Deputy Minister of Foreign Affairs.

“On the other hand, what puzzled me from the beginning was that the whole case was initiated not by some economic entities, not by EU-based energy companies which could have theoretically complained about those contracts, but by the government of a member state which was at that time involved in arbitration with Gazprom,” he said.

READ MORE: EU charges Gazprom with ‘abusing’ market position in Central Eastern Europe

Lithuania is one of the countries in which Gazprom is under investigation for alleged price gauging, along with Poland, Bulgaria, Estonia, and Latvia. The antitrust case will also investigate the market dominance in these five countries as well as the Czech Republic and Hungary. The other claim relate to Gazprom’s alleged prevention of gas flow against borders and it using its near monopoly on gas pipelines across Europe.

In all of Europe, Lithuania pays the most for Russian gas, according to various estimates. In 2014, the price to the Baltic States averaged $425.9 per 1,000 cubic meters, TASS reported. Gazprom itself doesn’t make its prices for individual countries public.

The average price for Gazprom charged non-CIS countries for Russian gas in 2014 stood at about $340 per 1,000 cubic meters.

Most of the countries involved in the antitrust case either get all or almost all of their natural gas from Russia.

Previous gas disputes with Russia, notably in 2006 and 2009 when deliveries via Ukraine were shut off, are pushing the Commission to create an Energy Union, where imports to Europe would be set at one price for all members.

The EU officially brought the case against Gazprom on April 22, 2015 after an investigation was opened in September 2012. In September 2011, several Gazprom offices in the EU were raided.

Gazprom dismissed the charges as “groundless” and has 11 weeks to respond to the claim and call a hearing. If a settlement isn’t reached, the European Commission can fine the gas supplier 10 percent of its annual sales, so the EU could hit Gazprom with a fine of more than $16 billion, based on the company’s 2014 revenues of $164.62 billion.

Relations between Brussels and Moscow have been frosty since the Ukraine conflict broke out in late 2013. Sources within the EU said that even though the antitrust case was prepared last summer, the EU Commissioner José Manuel Barroso put the brakes on the case, worried it would interfere with a diplomatic solution in Ukraine.

On December 1, while on a trip to Turkey, Russian President Putin announced that Gazprom was no longer going to build the South Stream pipeline through Europe, and instead, would pursue the Turkish Stream project to deliver gas to Europe’s borders via Turkey. Putin blamed the failure of South Stream on the European Commission.

Article source: http://rt.com/business/253269-lithuania-eu-gazprom-antitrust/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

RIA Novosti / Ramil Sitdikov

The Russian ruble has strengthened to a point where it is actually too strong, Russian Finance Minister Anton Siluanov said on Friday during a lecture in St. Petersburg.

“What happened was expected: the volume of gold reserves stabilized, then the ruble started stabilizing and has now strengthened. We believe that it has strengthened excessively,” Siluanov said at a lecture in St Petersburg.

On Friday, the ruble gained 1.22 percent against the dollar, trading at 51.37 at 5:00pm in Moscow. After gaining a record 15 percent in the first three months of 2015, the ruble has begun to weaken, which the Central Bank sees as a good sign. The regulator is trying to reverse the gains the currency picked up this year. However, a stronger ruble could pose problems for exporters who benefit from a weaker currency. At stake is also Russia’s project of import substitution; as the ruble gets stronger customers have more purchasing power to buy foreign goods.

READ MORE: Russian ruble seen as world’s best performing currency, hits 2015 high

The rapid rise has been spurred by higher oil prices as well as more solid internal economic factors in Russia, such as demand for rubles to buy attractive Russian sovereign debt and the ceasefire in Ukraine. It is the world’s best performing currency of 2015 so far, according to Bloomberg.

READ MORE: Rapid rise of the ruble is over – Bank of Russia

In 2014, the currency lost 46 percent of its value, hitting an all-time low of 80 against the US dollar on December 16. The ruble nosedive was in tandem with oil prices, as well as panic that sanctions and low oil prices would negatively affect the Russian economy.

At the same lecture on Friday, the Finance Minister spoke on Russia’s strengthening economic relationship with China, including boosting trade as well as the joint project to develop a route to speed up trade, dubbed the new Silk Road.

READ MORE: Russia and China to increase finance cooperation – minister

Article source: http://rt.com/business/252769-ruble-too-strong-siluanov/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Minister of Finance of Greece Yanis Varoufakis (R) and Minister of Finance of Spain Luis de Guindas Jurado speak before Eurogroup tour-de-table during informal meeting of Ministers for Economic and Financial Affairs (ECOFIN) in Riga, Latvia, April 24, 2015 (Reuters / Ints Kalnins)

Grexit? Gredge? Graccident? Grimbo? Each clever hashtag to describe Greece defaulting and leaving the eurozone is becoming more a reality, after talks between Greece and its EU creditors to unlock €7.2 billion for Athens to pay off its IMF debt failed.

“A comprehensive deal is necessary before any disbursement can take place,” Eurogroup President Jeroen Dijsselbloeme said at the press conference in Riga following the meeting Friday. “Responsibility for that relies mainly on Greece,” he said, adding that too much time was lost during the past 2 months.

EU Economics Commissioner Moscovici: Wrong to say nothing happened over past two months, but comprehensive deal still far away. #Greece

— Vincenzo Scarpetta (@LondonerVince) April 24, 2015

Greece’s four month bailout extension expires in June.

Eurozone finance ministers held Greek debt talks in Riga, Latvia to discuss unlocking bailout funds, so Greece can pay its next $450 million repayment on an IMF loan. The bailout will help Greece’s struggling economy live through several debt repayments due over the course of the next two months. The euro declined on the news of no deal.

#Euro slips on limited #Greece talks progress. Pares all of today’s gains. Now $1.0828 pic.twitter.com/retl3YPv3z

— Holger Zschaepitz (@Schuldensuehner) April 24, 2015

The next summit will be held in May.

pic.twitter.com/vKdGYytIek

— Joseph Weisenthal (@TheStalwart) April 24, 2015

While the talks were in progress, Greek Finance Minister Yanis Varoufakis published a blog post that said he was ready to meet demands. The post was called ‘A New Deal for Greece.’

“The current disagreements with our partners are not unbridgeable,” Varoufakis said in his blog, also saying Greece will agree to sell national assets to raise money and that his country’s tax system must be reformed. However, the finance minister stood firm against further wage and pension cuts.

Friday April 24 marks the day that was set as a deadline for the framework agreement over the terms of a new loan. Greek Prime Minister Alexis Tsipras met with German Chancellor Angela Merkel in Brussels on Thursday, and both agreed they wanted to reach a deal by the end of April.

European finance ministers are waiting for a more concrete list of measures from Greece to reach a preliminary agreement on financing the country’s economy and external debt.

Ahead of the meeting, several finance ministers said there will be no deal. European Vice-President Valdis Dombrovski and German Finance Minister Wolfgang Schauble both said there was not enough progress to release the funds.

Is Greece leaving the eurozone?

Varoufakis said that in order for Greece to remain in the eurozone, international lenders have to work with Athens to lessen the grip of austerity. The two sides have yet to set budget targets for 2015.

READ MORE: Greece offers 5 key points for consensus with intl creditors

Despite the gloomy attitude of officials, before the announcement, markets were heating up on a potential agreement. The euro hit a two week high and Greek banks that rely on the tranche being released saw shares rise 8 percent. The Athens stock market advanced 3 percent in early trading.

Investor confidence leading up to the meeting was also high after Wednesday’s decision by the European Central Bank to increase the emergency liquidity assistance (ELAs) facilities Greek banks can borrow as a lifeline for its lending institutions. According to a Greek banking official, the ECB raised the Greek Central Bank’s lending capacity to €75.5 billion ($81.2 billion) up from €74 billion last week.

Greek government bonds also rose slightly, decreasing the yield on debt. Yield on Greece’s 2-year debt fell to 24.6 percent from 25.4 percent on Thursday evening.

Reminder – ahead of #Eurogroup, here are #Greece payments up to Sept , needs deal soon http://t.co/vmgOVkZOoU pic.twitter.com/i6Ye8BcALi

— Open Europe (@OpenEurope) April 24, 2015

Greece is scheduled to make several payments to the IMF in the next few months. On May 1 €203 million is due, another €770 million on May 12, and about another €1.6 billion in June in Special Drawing Rights (SDRs), an artificial currency created by the IMF that the institution uses to give out extra funds.

Authorities in Greece made a €448 million payment to the IMF on April 9, on schedule.

The Syriza party won elections in January on the promise to stay in the eurozone, but renegotiate the country’s €316 billion debt.

Article source: http://rt.com/business/252657-greece-eu-latvia-riga/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Presidents Vladimir Putin of Russia and Cristina Fernandez de Kirchner seen during the ceremony of signing joint documents on the results of Russian-Argentinian talks in the Kremlin, April 23, 2015 (RIA Novosti / Alexey Druzhinin)

Russia plans to invest $2 billion in Argentinian nuclear power plants, and Russia’s Gazprom has signed a deal to explore oil and gas fields in Argentina, a project worth another $1 billion.

Argentinian President Cristina de Kirchner and Russian President Vladimir Putin announced a renewed energy pact at a news conference in Moscow on Thursday.

Russia’s state nuclear energy company, Rosatom, said it will provide funds to build a sixth reactor at the Atucha nuclear power plant in Buenos Aires province.

“The amount of Russian investment is about $1.9 billion,” Putin said.

Russia’s Inter RAO Group signed a letter of intent for the construction of the Chihuido-1 hydroelectric power plant on the Neuquen River – a project worth $2 billion. Russia’s VEB bank will provide $1.2 billion of the needed investment, Sputnik reported. The power station will have a capacity of 637 megawatts. The company also expressed its interest in building the Chihuido-2 plant with a 296 megawatt capacity.

President de Kirchner signed a nuclear power deal in July 2014 when President Putin visited Argentina before the BRICS summit in Brazil.

The high-level talks were not only fruitful in hydroelectric power, but also in gas.

“Gazprom is preparing a master plan to develop the Argentine gas industry, and is considering the possibility of setting up a joint venture to develop hydrocarbon deposits in Argentina,” the Russian president said.

“In the mid-term (next year o 2017 maybe), work on a shale project.” #YPF #Gazprom#Argentina#Shale#VacaMuerta

— Chris Noon (@NoonInterfax) April 23, 2015

Russia’s largest gas producer Gazprom signed a memorandum of cooperation with Argentinian energy company YPF to explore the Vaca Muerta oil and gas fields in southern Argentina. According to the Argentine Ministry of Industry, the project could cost $1 billion.

READ MORE: ‘Cooperation with Latin America is key to Russia’s foreign policy’ – Putin

It’s estimated to be one of the largest shale reserves in the Western hemisphere. If the fields are properly developed they have the potential to double Argentina’s energy output within 10 years, Reuters reported Wednesday.

At present, more than 20 percent of Argentina’s energy is produced with Russian technology and equipment.

The two heads of state signed over 20 documents and established an “all-encompassing strategic partnership” across sectors such as agriculture, trade, and military cooperation, as well as memorandums to boost environmental protection and fight drug trafficking.

At the talks Putin assured de Kirchner that her country has Russia’s support in its territorial dispute with Great Britain over the Malvinas (Falkland) Islands. The Russian President also urged for the work on a GLONASS station in Argentina to be sped up.

Putin said that the Russian heavy machinery company Uralmash, “plans to set up a joint venture with Argentine partners to produce oil equipment in Argentina.”

Another major deal relates to transport: Russia will supply 40 trolleybuses to Argentina in June.

Article source: http://rt.com/business/252477-russia-argentina-energy-deals/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

April 23, 2015. Russian President Vladimir Putin and President of Argentina Cristina Fernandez de Kirchner during a meeting in the Kremlin (RIA Novosti / Alexey Druzhinin)

Russia and Argentina will consult on using national currencies in mutual trade settlements, Russian President Vladimir Putin said during a news conference with his Argentinian counterpart Cristina Fernandez de Kirchner.

“We agreed to hold extensive consultations on the question of using national currencies in trade payments between states and between commercial partners,” the Russian President said.

Russia has set up similar schemes with China, Iran, Egypt, and Turkey to cut out the US dollar, the so-called middleman used in most transactions.

In October, Russia and China agreed a currency swap worth over $20 billion, in order to increase trade and business between the two.

READ MORE: Russia, China agree on more trade currency swaps to bypass dollar

Earlier in April, Russian Prime Minister Dmitry Medvedev proposed setting up a similar system with Vietnam.After the Prime Minister’s visit to Vietnam, Russia’s Industry and Trade Minister Denis Manturov suggested Indonesia could get a comparable deal.

Article source: http://rt.com/business/252417-russia-argentina-local-currencies/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Traders work at their screens in front of the German share price index DAX board at the stock exchange in Frankfurt April 23, 2015 (Reuters / Stringer)

Germany’s biggest lender has been fined $2.5 billion by US and UK regulators for manipulating market key rates including Libor, the benchmark for interest rates on trillions of dollars of financial contracts.

The bank admitted in Thursday’s settlement that its employees rigged the yen Libor (London Interbank Offered Rate) and the Brussels and Tokyo equivalents, Euribor and Tibor, to benefit their trading book and those of traders at other banks.

This is the biggest fine in a Libor case to date.

Deutsche Bank are to pay a record $2.5 billion fine to settle Libor investigation http://t.co/fzvBefeESo pic.twitter.com/s2mcen7EWc

— WSJ News Graphics (@WSJGraphics) April 23, 2015

The fixing of the interest rates by Deutsche Bank employees in London and Frankfurt from 2005 to 2009 was deliberate, and the employees were aware that it was wrong, the New York State Superintendent of Financial Services Benjamin M. Lawsky said on Thursday.

From 2005 to 2009 some of the Deutsche Bank traders “frequently requested that certain submitters submit rate contributions that would benefit the traders’ trading positions, rather than the rates that complied with the IBOR definitions,” according to the New York State Department of Financial Services press release.

The press release also cites a dialogue from February 21, 2005, when one trader requested another trader who performed submitter duties on a back-up basis.

“Can we have a high 6-mth libor today pls gezzer?”

“Sure dude, where wld you like it mate?” (Trader/submitter)

“Think it shud be 095?”

“Cool, was going 9, so 9.5 it is.” (Trader/submitter)

“Super – don’t get that level of flexibility when [the usual submitter] is in the chair fyg!” – the trader joked.

Article source: http://rt.com/business/252389-deutsche-bank-libor-fine/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Reuters / Bogdan Cristel

Bulgaria has reportedly inked a deal on a new “gas corridor” with Romania and Greece which will be completed in 2018, and is expected to cut the country’s almost total dependency on Russian natural gas.

The agreement on the $236.2 million link between Bulgaria, Romania and Greece, which is also known as a vertical gas corridor, has been signed by the energy ministers of the three countries in Sofia, the Wall Street Journal reported on Wednesday. Bulgaria will also be able to buy about 3-5 billion cubic meters of gas annually from Azerbaijan and from Greece’s liquefied natural gas terminals.

“We are finally getting a new source of gas because until now we were totally reliant on one source—Russia,” Bulgaria’s Deputy Energy Minister Zhecho Stankov was cited as saying by WSJ.

Bulgaria consumes about 3 billion cubic meters of natural gas, 95 percent of which is imported from Russia, and the majority of that comes through Ukraine which is seen as an unreliable transit country. It has been cut off from Russian supplies twice, in 2006 and 2009. Bulgaria has been seeking to diversify its gas supply by building interconnection links with neighbors.

“We often talk about diversification, security of supplies. Without real connectivity between neighbors this is just eyewash,” Bulgarian Deputy Prime Minister Tomislav Donchev said, according to greekreporter.com. He also added that Europe’s gas map is changing and interconnections with neighbors allow Bulgaria to be ready for “all future scenarios”.

READ MORE: Gazprom announces final nail in the South Stream coffin

The country has been significantly affected by the cancellation of the South Stream project, under which it was hoping to get gas directly from Russia, and not via Ukraine. Bulgaria lost more than 6,000 new jobs and over $3 billion of investment when Russia scrapped South Stream because of objections from the EU. In December, Gazprom CEO Aleksey Miller announced the construction of the Turkish Stream pipeline that’ll deliver Russian gas to Turkey and onwards to Europe via the Black Sea.

Bulgaria, meanwhile, is also seeking to raise its own production of natural gas. Last week the country launched a tender for deep water gas and oil exploration off its Black Sea coastline, according to Stankov. In February, government officials claimed they were in talks with Royal Dutch Shell, BP, Statoil and other oil companies over the exploration of Bulgaria’s Teres and Silistar oil and gas blocks.

Article source: http://rt.com/business/252261-bulgaria-deal-pipeline-diversification/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Reuters / Peter Andrews

A futures trader accused by US authorities of contributing to the huge crash in the US stock market in 2010 known as the ‘flash crash’, wiping billions off US companies’ share prices, appeared in the Westminster Magistrates’ Court on Wednesday.

Trader Navinder Singh Sarao, 36, who opposed his extradition to the United States to face trial in an Illinois court, was granted a conditional bail of £5.05 million. Sarao must provide £5 million – the amount he has in his trading account – himself, with his parents obliged to pay a security of £50,000. They would lose that if he failed to comply with his bail conditions without good cause.

The trader was arrested on Tuesday as the US Department of Justice (DoJ) charged him for wire fraud, commodities fraud and manipulation, and one count of ‘spoofing’—when a trader places a bid or offer with the intent of canceling it before execution.

The “flash crash” trader vows to fight U.S. extradition plans. Here’s how “spoofing” works: http://t.co/rzAbAvNyCR pic.twitter.com/ryyFRTqgFX

— WSJ Markets (@WSJmarkets) April 22, 2015

In total, Sarao is charged with 21 counts in a 2010 fraud in what he used an automated trading program to manipulate the market for SP 500 futures contracts — known as E-Minis — on the Chicago Mercantile Exchange, the largest US futures market.

The system allowed him to sell futures faster than they fell in value, and purchase them back before the price rebounded. The US Commodity Futures Trading Commission (CFTC) accused Sarao of illegally obtaining $40 million profit between 2010 and 2014, the Financial Times reported.

The US Department of Justice suspects that the trader provoked the so-called ‘Black Thursday’ on May 6, 2010. The Dow Jones index plunge about 1,000 points and then leaped back to its previous value within a few minutes, which became the steepest fall of the stock index in history. The ‘flash crash’ resulted in trading the shares of such companies as General Electric and Accenture at just one cent, and cancelation of thousands of trades.

Sarao reportedly established companies in Nevis and Anguilla to shelter his assets from tax, having run his operation from his UK residence, 17 miles (27km) west of the London’s financial center.

Article source: http://rt.com/business/252069-uk-trader-flash-crash/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

President Vladimir Putin (R) and Agriculture Minister Alexander Tkachyov (RIA Novosti / Michael Klimentyev)

Russian President Vladimir Putin has tasked the new Agriculture Minister Aleksandr Tkachyov with strengthening the sector and solving import substitution goal quickly. Western food imports have been banned following the US and EU anti-Russia sanctions.

The president has instructed new Agriculture Minister Tkachyov and his predecessor Nikolai Fyodorov, who has become a presidential aide, to work closely with the regions to develop the sector, focusing on import substitution.

READ MORE: Putin: Russia must use sanctions to achieve new development horizons

READ MORE: Putin bans agricultural imports from sanctioning countries for 1 year

Tkachyov assured the President he would do his best to justify the trust, and to push the industry towards greater import substitution, increasing production, reducing food prices, as well as creating favorable conditions for agricultural business and entrepreneurs.

Russian banned agricultural products from the EU, USA, Australia, Norway and Canada in August, in response to anti-Russia sanctions taken by the Western countries over the crisis in Ukraine.

The embargo has been seen as a trigger to boost domestic agriculture and a unique opportunity to develop import substitution.

The food embargo has already caused billions of dollars of losses on both sides, with Moscow now considering some relief. On Monday, Russia started quality control of fruits and vegetables from Hungary, Greece, and India in order to begin imports, with products from Cyprus to undergo similar tests next week. The countries asked Russia to cancel or reduce the food import embargo they face.

Article source: http://rt.com/business/251989-russia-agriculture-minister-products/?utm_source=rss&utm_medium=rss&utm_campaign=RSS